StepChange IPO Priced at $0.20 per Share to Raise Up to $15 Million

IPO and Acquisition Strategy

StepChange Holdings Limited has launched an initial public offering (IPO) to raise between $14 million and $15 million by issuing up to 75 million shares at an issue price of $0.20 each. The primary purpose of this capital raise is to fund the acquisition of StepChange Consultants Pty Ltd, a well-established Australian SAP ERP consulting firm. This acquisition will position StepChange Holdings as a significant player in the IT services sector, particularly within the SAP ecosystem.

Business Overview and Market Opportunity

StepChange Consultants, with origins dating back to 2003 and formal incorporation in 2014, specializes in ERP transformation services focused on SAP software solutions. The company boasts a team of approximately 150 personnel and serves a diverse client base that includes Tier 1 enterprises and government organizations, primarily in sectors such as energy, mining, and government services.

Financially, StepChange has demonstrated consistent profitability, recording approximately $42.8 million in revenue and $3.65 million in EBITDA for the fiscal year 2024. The broader SAP services market in Australia and New Zealand is estimated at $5.85 billion and growing at a compound annual growth rate (CAGR) of 7.6%, driven by increasing demand for cloud migration and ERP modernization projects.

Growth Prospects and Strategy

The company’s growth strategy is twofold, organic expansion through new contract wins and deepening existing client relationships, and inorganic growth via acquisitions of complementary IT services businesses. The transition from on-premise SAP ECC solutions to cloud-based S/4 HANA platforms presents a significant market opportunity, with many organizations expected to migrate over the coming years.

StepChange also plans to broaden its service offerings, including emerging capabilities in sustainability affairs support, aligning with clients’ environmental, social, and governance (ESG) strategies. The company’s management team, led by experienced executives and overseen by a board with extensive IT services expertise, is well positioned to execute this growth plan.

Offer Details and Underwriting

The IPO is fully underwritten by Ord Minnett Limited, providing assurance of capital raising success. The offer includes a Broker Firm Offer and an Institutional Offer, with shares to be listed on the Australian Securities Exchange (ASX) under the code 'STH'. Post-listing, the company will have a market capitalization estimated between $31.3 million and $32.3 million, depending on the final subscription level.

Risks and Considerations

Investors should be aware of several risks, including client concentration risk, as the top customer accounted for approximately 77% of StepChange’s revenue in FY24. The company is also reliant on the SAP software ecosystem, faces competition from global and local IT service providers, and must successfully manage contract renewals and acquisitions. Additionally, the forecast financial information is subject to assumptions and uncertainties inherent in the IT services market.